The novelty in the characters of financial products is a new  phenomenon emerging from the policy decision of liberalization announced by the government in the early -90s. Financial products are innovatively named with a lot of interesting features factored in them which both serve the respective purposes of the issuers of these instruments as well as the investors. For example Essar Steel offered one such instrument known as Convertible debentures with warrants and loyalty coupons. Tata Iron and Steel Company launched Secured Premium Notes ( SPNs) with warrants, Flex Industries similarly came out with a novel product - Partly Convertible Debentures with warrants attached. Reliance Petroleum issued Triple Option Convertible Debentures with equity warrant.

As it is very clear that the basic purpose behind designing such financial products are needs specific which go into meeting the objectives of both. For a corporate entity having a fairly long gestation period issue of convertible instruments like Partly Convertible debentures or Fully Convertible debentures eminently suits its  financial requirements. And conversion eventually takes place the debt of the company goes down with the consequent dilution of owners' stake.

It is an appropriate context to look at this new age financial products:

 Triple Option Convertible Debentures:

This novel financial instrument is characterized  by  non-flow of interest for a time frame - say five years, gradual issues of equity and no put option to be exercised by the investors opting for it. The seeming advantages of this form of instrument lie in relative low expenditure towards the cost of issue which is generally termed as floatation cost vis-a-vis any general public issue. It also obviates the need to look to financial institutions for term loans and the consequent higher costs towards interest payment obligations. Reliance Power Limited made use of this product and should be credited with being the first to do so.

Equity with Differential Voting  Rights:

Differentiation in the matter of equity rights has been an equally novel feature. It is known that equity shareholders enjoy voting rights which are proportionate to the size of their holdings and participate in the decision-making process  of any company. But dilution of these rights in exchange for some benefits have made this type of financial product hugely popular. Tata Motors limited brought this product  The Company issued Equity shares of two kind clearly differentiating rights. One of this kind was issued for Rs.340 per share with one vote per share and the other was issued for Rs.305 per share
with voting rights one per every ten shares with the gain of extra 5% dividend. 

Deep Discount Bond:

These kind of bonds are issued at a certain discount of their face values and the tenure is long term with some tax advantages. For the issuer of deep discount bonds no service cost is incurred over the period of the bond and re-financing need is thereby obviated. Many companies have successfully experimented with this type of financial product.

Floating Rate Notes (FRN):

These financial instruments carry a floating  rate with a ceiling  and floor rate and linked to a reference rate. For example Tata Sons had such an issue of FRNs with a floor rate (lowest) of 12.5% and a ceiling rate (Highest) which is also known as cap of 15.5% linked to the reference rate of 364-T-Bill yield which was 9.85 at that point of time. Thus it is clear that the return of the investment would be in the range of cap rate and floor rate depending on the fluctuations in the reference rate.   

Zero Coupon Bonds:

It is a kind of financial product which not characterized by periodical payments of interests. What the investor gets is a higher maturity value of his investment. It is fairly common in India and elsewhere.

Convertible and Zero Coupon Convertible Bonds:

It is almost the same as Zero Coupon Bonds with the convertibility option and the effective interest tends to be lower because of this convertibility factor.

Secured Premium Notes (SPNs):

The striking feature of this type of financial products or instruments is that it enjoys superior security as the investors' interests are well protected against charge of assets of the issuer company. Tata Iron and Steel Company launched and successfully got it subscribed way back in 1992. The investors have to pay a premium over the market price of these instruments.

Long Term Option Contract:

As options are all instruments used as hedging techniques, long term option contract is a great instrument in risk management. The Securities Exchange Board of India in an important introduced long term option contracts in Indian bourses. And It has been a phenomenal success. so far.

Index Options:

Options contracts based on indices like BSE, Nifty  were made available by SEBI with a time horizon
of 5 years with all  the regulatory framework to ensure their safe and secure functioning from the investors' perspective. Similarly stock options too came into existence to afford investment opportunities for millions of investors.

Currency Futures:

Currency futures are types of financial instruments aiming at hedging different positions in foreign currencies. It is a futures contract and the underlying asset is a certain foreign currency. It is just like any other futures contract and this derivative product was introduced at NSE in 2008.

Yankee Bonds:

Way back in 1996 Reliance Industries Limited made history by being the first Indian company to sell this type of bonds to the tune of $100 million 50-year Yankee Bond in the US markets. The point to ponder over here is that the US investors reposed faith in the creditworthiness of an India corporate for such a long time!

Options on USD-INR Spot Rate:

Securities Exchange Board of India has cleared the deck for introduction of another  currency derivative product which is known as options based USD-INR spot rates by prescribing all the requisite guidelines and regulation as to its working in the derivative segment of eligible of Stock Exchanges.

It could be seen from the above brief description of various financial products which have emerged in the financial landscape of the world, to meet the demands of a dynamic field which is called finance. And such innovative financial products would continue to be designed and sold in th years to come.